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HDFC Securities Institutional Equities
Vinati Organics Ltd. will be commercialising projects worth approximately Rs 8 billion over the next two quarters, which will fuel the company's growth from FY25 to FY27E. Revenue and Ebitda CAGR over FY24-27E are expected to be 19%/20%. The addition of a new range of products in its subsidiary, Veeral Organics Pvt Ltd., will help Vinati Organics diversify its customer base.
The Anisole route process used by the company to produce these products is both environmentally friendly and cost-effective. The merger of Veeral Additives with Vinati Organics is maximising efficiency in the company's antioxidants value chain. Vinati Organics is fully backwards integrated, from IB to Butyl Phenols manufacturing and further into antioxidant production.
The company is also expanding its ATBS capacity by 33% to 60KTPA to meet rising demand. Cost efficiency through integration and improved economies of scale will help sustain margins.
We expect an adjusted profit after tax CAGR of 19% over FY24-27E, with return on equity improving from 15.5% in FY24 to 17.2% in FY27. Currently, the stock is trading at 50/40.2 FY25 and FY26, which we believe is contextually high.
Therefore, we are maintaining a Sell recommendation on Vinati Organics with a target price of Rs 1,491.
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